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Should you buy a new or used car?

Couple looks at a car at a dealership
Peter Cade/Getty Images
Couple looks at a car at a dealership
Peter Cade/Getty Images
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It’s the choice that millions of car buyers make each year: Do you buy a brand-new ride or opt for an older car to save money? There are pros and cons to each. Buying new can be a good choice if you want the latest features and cheaper initial maintenance costs. Buying used is right if you are willing to compromise on some features in order to save money on your purchase and insurance.

New vs. used cars

There are a few options when it comes to scouting out your purchase, be it new or used. You can find new cars at a local dealership, or by searching on sites like Autotrader or Edmunds. Used cars are available through dealerships as well, but you can also find them — potentially cheaper — through independent dealers, private-party sellers or superstores like CarMax or Carvana.

In general, used cars are cheaper than new cars, which is why many borrowers choose a model that’s a few years old. Kelley Blue Book and Edmunds can give you a sense of purchase costs and five-year maintenance costs. Here’s a price breakdown from Kelley Blue Book for a new Honda Accord versus a used one.

New 2022 Honda Accord EX-L Used 2017 Honda Accord EX-L
Typical listing price $31,242 $23,000
Estimated monthly payment $513 $379
Estimated first year of ownership maintenance costs $133 $1,408

Prices are based on a good credit score, a loan term of 60 months and a down payment of $3,500 for the new vehicle and $2,500 for the used vehicle. Maintenance costs for the first year of ownership — year one for 2022, year five for 2017 — are according to Edmunds.

Price shouldn’t be the only factor you consider when selecting a car. You should also factor in vehicle depreciation, safety features, reliability and your own personal preferences.

Considerations when buying new

Pros Cons
• Customizable purchase. • Higher purchase cost.
• Better interest rates. • Faster vehicle depreciation.
• Up-to-date safety features. • More expensive insurance.

The primary benefit of buying a new vehicle is that you will be able to get it outfitted exactly to your preferences — you can select the color and style you want and request any add-ons that appeal to you.

There are practical advantages too; you will drive off with the latest technology and safety features, and the vehicle’s warranty should limit the amount you spend on repairs and maintenance in the first few years of ownership.

With a new car purchase, you are also more likely to get a better interest rate on an auto loan than you would with a used car purchase, often by a few percentage points. New cars are often several thousands of dollars more expensive than their used counterparts, which could make a down payment or monthly loan payments harder to afford.

You’ll also have to contend with vehicle depreciation, or the rate at which your car loses value. As the saying goes, new cars lose value as soon as you drive them off the lot; Experian estimates that new cars lose 20 percent of their value in the first year, and depreciation continues for the first 10 years of ownership.

If you do decide that purchasing new is the right choice for you, plan and look out for seasonal deals. Timing your car purchase carefully and shopping around for auto loan rates can soften some of the upfront expenses.

Considerations when buying used

Pros Cons
• Cheaper purchase price. • Higher maintenance costs.
• Lower insurance rates. • Not made to order.
• Less depreciation. • Unknown driver history.

One primary benefit of used vehicles is that they tend to be less expensive than their new counterparts. Along with this, many pre-owned cars carry lower insurance rates, titling fees and sales taxes — and they depreciate much more slowly. If you are trying to save money on your purchase, a used car is a good choice.

With that said, buying used may require some extra legwork. You will have to search to find the exact style, color and add-ons that you want. And even then, you may have to make some compromises.

You will also need to check the vehicle’s maintenance record to ensure that the previous owner took good care of it. It’s wise to bring the car to a trusted mechanic for a checkup — including a brake check and engine test — before closing any deal. You can expect to pay about $100 for the mechanic’s efforts, but it is well worth it. Most private sellers won’t offer you a warranty, so you could wind up paying a bundle in repair costs if the car is a lemon.

Even if the car is in relatively good condition, a used car will inevitably need more maintenance and repairs over time. This could eat into the savings you get from your initial purchase, so consider your long-term budgeting when selecting new versus used.

What about certified pre-owned options?

If you’re leaning toward buying used but are still hesitant about trusting the vehicle’s history, a certified pre-owned vehicle is a great choice. A certified pre-owned car is a used car that has undergone a complete inspection by a dealership or the manufacturer.

These cars serve as a middle ground between used and new vehicles in terms of upfront price, since you’ll pay extra for the inspection. However, this additional certification is perfect for a driver who wants the security of a car in mint condition without the price tag of a brand-new vehicle.

How to choose whether to buy a new or used car

Deciding between a new or used vehicle will come down to a variety of factors, including financial considerations and your personal tastes and needs. Here are some of the issues to consider when choosing which type of purchase is right for you.

  • Budget: The variety of costs associated with a car are often cheaper when you buy a used vehicle rather than a new one. Everything from the price of car insurance to dealer fees will be less expensive when you buy a used vehicle. And, depending on the vehicle you choose, the purchase price will also typically be less for a used car.
  • Bells and whistles: One of the benefits of buying a new car is that it will include the latest technology and safety features. What’s more, if being able to select a specific vehicle color or interior finishes is important to you, a new car purchase will make this easier. When purchasing a used car, you may have to spend a long time searching to get exactly what you want.
  • Maintenance needs: A car that is slightly older may have higher maintenance costs, which is an important consideration if you have a limited household budget. Much of the maintenance associated with a new car will likely be under warranty.

How to find the best deal on your car

Whether you decide to buy new or used, remember that researching the vehicle is the most crucial element in getting a great buy. Your research should include checking the model’s safety record, insurance costs and five-year cost-to-own.

You should also take the time to test-drive multiple vehicles and shop around with a few sellers, getting quotes from a few auto loan lenders to ensure that you are getting the lowest monthly payment possible.

Learn more

Written by
Rebecca Betterton
Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ins and outs of securely borrowing money to purchase a car.
Edited by
Student loans editor